9 simple ways to overcome your debt: your finance guide

November 26, 2022January 13, 2024 - by Vikas Chaudhary - 1 Comment

Links

Post Views: 770

9 simple ways to overcome your debt: your finance guide

It’s difficult to get out of debt. Sometimes it takes everything you’ve got to pay your bills on time and put money away for an emergency. However, if you just pay your creditors the minimal amount due, you run the risk of sliding into debt traps from which it may take you months or years to escape. Fortunately, there are several debt relief options that won’t make your life unpleasant. You can change your spending habits to make extra payments toward your bills each month, or you can restructure your accounts with a debt consolidation loan or balance transfer credit card. Adopting the debt snowball method or using financial windfalls to pay off your balances more quickly are two more potential options.

Use savings to pay debt

IMAGE CREDITS: Unsplash.com

Using some of your funds to pay off high-interest debts is not something you should be terrified of doing. Because you will stop paying interest on those substantial levels, using cash reserves for debt repayment is a wise choice. Even though having a little extra money in your bank account may make you feel secure, the reality is that, given the historically low interest rates in effect right now, those funds aren’t really doing you any good. Spare money shouldn’t be completely spent. Use some of your cash reserves to pay off your debts if you have a lot of it.

Negotiation for a lower rate of interest on your debt

IMAGE CREDITS: istockphoto.com

To bargain for a reduced interest rate, contact your creditors. You might be surprised by how many creditors are receptive to lowering your interest rate in light of your payment history and account status.
A few years of a positive relationship may put you in a much better position to be eligible for a lower interest rate. As you pay off the loan during the year, this can help you save some money on interest payments.

Tax refund yo pay your debt

IMAGE CREDITS: Unsplash.com

While it may be tempting to spend that tax refund money on a luxury item or a trip, making a partial or complete repayment of your debt would be a wiser financial decision. If you use a single lump sum debt payback approach, think about the value of lowering your monthly payments. Instead of taking pleasure in the momentary delight of a purchase, you will gain from having less debt both now and in the future.

Cashing your life insurance

Because it will allow you to swiftly pay off bigger sums of debt, cashing in your life insurance could be a good debt repayment plan. It can make sense to use the money from your life insurance policy to pay off debt if you feel as though you are drowning in debt and don’t have any dependents or spouses who would need to receive the proceeds. If you have a term life insurance coverage, this tactic won’t work for you. It only functions for people who hold full life insurance policies with accrued cash value. It’s also crucial to keep in mind that, even if you do have beneficiaries, you might be able to access some of the cash value of your whole life insurance policy.

Transferring credit card balance

IMAGE CREDITS: Unsplash.com

When credit card debt transfers appear in our mailboxes, the majority of us usually rip them up. However, a balance transfer can be beneficial if you wish to accelerate your debt reduction efforts. You can completely avoid paying credit card interest by switching high rate debt to a zero percent deal that lasts for about a year. Because of the increased cash flow, you will have more money to pay down your credit card debt. To make sure you are actually getting that low rate, please read the fine print before signing up.

Eliminating old debt

Despite the fact that they are no longer obligated to by law, some people nevertheless make payments on very old credit card debts. We all want to repay our debts. However, you should prioritise paying off your current obligations rather than older ones that are even more than seven to ten years old if times are exceptionally tough or you just lack the money to do so. Each state has its own rules concerning outstanding debts. In some areas, the amount of time a creditor has to file a lawsuit against you for an old debt is limited, while in other states, debt collectors are prohibited from pursuing a particular form of debt after a certain period of time has passed.

Discharging credit card debts

IMAGE CREDITS: Unsplash.com

Only resort to bankruptcy as a last resort if you can’t pay off your debts any other way. However, in extreme cases—such as when you have no income, fully overwhelming medical expenses, or credit card payments—a Chapter 7 bankruptcy filing is necessary to completely erase credit card debt. You can also consider Chapter 13, which lowers some of your credit card debt, if you feel compelled to pay off your debts morally. Then, over a three to five year period, you repay the balance of the debt.

Debt snowball

IMAGE CREDITS: Unsplash.com

Your debt, use the debt snowball method. You are expected to make the minimum payment under this debt repayment plan on all other obligations. With the exception of the smallest obligation, which you will pay as much as you can. If you make “snowball” payments toward your smallest debt, it will be repaid quickly; after that, you can move on to the next-smallest loan while making small payments toward the balance. Imagine you owe $5,000 on your credit card, $1,000 on your automobile, and $10,000 on college loans. Using the debt snowball method, you would concentrate on paying off the auto loan first since it has the lowest overall balance.

Debt refinance

IMAGE CREDITS: Unsplash.com

Debt consolidation can help you pay off debt more quickly and save you hundreds of dollars in interest. Mortgages, vehicle loans, personal loans, and student loans can all be refinanced. A debt consolidation loan, a personal loan that can have lower interest rates than your current loans. Is one option to accomplish this. If you owe money on credit cards, you might also think about shifting the debt to a balance transfer card. For a set period of time, usually between six and 18 months, these cards carry 0% APR.